If an employer only does business in one state and all employees are residents of that state, state income tax obligations are simple. It is more complex when companies do business in one state and have employees who are residents and non-residents or do business in more than one state.
Dual-state employees are residents of one state who work:
100% outside their resident state, or
in the state of residency and another state simultaneously during a single pay period.
State laws and reciprocal agreements determine whether state income taxes are withheld for dual-state employees.
Multi-state employees moved during the calendar year. Therefore, they have lived and worked in more than one state. Within a single pay period, they live and work in their resident state.
Employers who pay state unemployment insurance in more than one state are required to file Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.